ABC’s Potential Online Subscription Service — Who Wins and Who Loses

ABC may be considering rolling out an online subscription service soon, based on a consumer survey that was unearthed by Engadget. The survey, which details the possible terms of the subscription service, reveal that the service would run as a premium offering alongside its existing free online viewing options.

The survey asks if users would pay for a premium service that would have the five most recent episodes of certain hit ABC shows, and full seasons for some shows. The offering would also include catalog content, including full past seasons of long-gone ABC shows like My So-Called Life. But at the same time that it rolls out the subscription service, ABC would cut back the amount of free content available on ABC.com and other online distribution points, like Hulu, to just having the two most recent episodes available for free.

There would be a slight difference as to when consumers would be able to access content; the proposed premium offering would have videos available immediately after they air, as opposed to the next morning. The premium offering would still have ads attached to its shows, although significantly fewer than are shown against its current free online offerings. Today, videos on ABC.com show about 35 percent of the ads that run against broadcast content; with the subscription offering, that would drop to about 15 percent.

When asked for comment by email, an ABC spokesperson wrote:

“In order to better understand our audience as the digital marketplace evolves, we constantly conduct research on a variety subjects to garner useful insights. We are always interested in learning more about how consumers think about content windowing, subscription options and new digital delivery methods which may or may not ever come to pass.”

While ABC has yet to determine whether it will create such an offering here are the potential winners and losers if an ABC.com subscription service came to pass.

Winners

ABC, by taking control of its destiny by going the straight-to-consumer route with its content, rather than depending too much on aggregators like Hulu and Fancast on the broadband side and nationwide distributors on the broadcast side. While this could eat into possible retrans fees, as cable operators argue that ABC is cannibalizing its own viewer base, average direct-to-consumer payments are bound to be much higher than what ABC is receiving from its distributors anyway.

Apple TV, as ABC becomes the centerpiece for the soon-to-be relaunched broadband set-top box. This is just a hunch, and not substantiated by any source with knowledge of the situation. However, ABC and Disney have deep ties to Apple (Apple CEO Steve Jobs is the largest single shareholder in the media conglomerate), and the broadcaster has been known to push new products along with Apple products. Remember, ABC was the first broadcaster to make its shows available for download on iTunes, and it was one of the first premium content providers to launch with a video app on the iPad. From that standpoint, tying up with Apple to make its new subscription service available through a newly launched Apple TV product makes a lot of sense.

Netflix, by giving consumers more reason to cut the cord. Some might think that a broadband service from ABC might be competitive to Netflix’s Watch Instantly streaming service — after all, a lot of the content that would be available through an ABC.com subscription service, like back seasons and episodes of Lost or Desperate Housewives, is also on Netflix — but the services would probably be more complimentary than anything. By operating its own online video subscription service, ABC would give consumers more reason to go broadband-only, which could give Netflix more potential cable-less subscribers to pitch to.

Losers

Hulu, which will be faced with far less content to provide its viewers. The possibility of an ABC-only online subscription service is a particular blow to Hulu’s plans for its own subscription plans, which would most likely not have the exclusive ABC.com subscription content available. It also means that ABC could be distancing itself from Hulu, just a year after the broadcaster finally came on board with an equity stake and a promise to share its content with the online video site. And if ABC already thinks it’s better to go it alone, that could spell trouble for Hulu in relation to its other broadcast parents and content partners, NBC and Fox.

Cable operators, which will have to compete with yet another online subscription service. While there’s no actual evidence that subscribers are cutting the cord — yet — being able to view some of their favorite programming immediately after it airs online for a low subscription fee might prompt some to actually do so. This is particularly true if ABC can get its subscription broadband offering into consumer living rooms by striking deals with consumer electronics manufacturers to connect the service with HDTVs, Blu-ray players and broadband set-top boxes like Roku or (as mentioned above) Apple TV.

Yet to be determined

Google TV, which could make subscription ABC.com content available through the browser, or through a native app. But given ABC’s close relationship with Apple, it’s unclear whether the broadcaster would spend significant resources developing a Google TV app.

Other consumer electronics device manufacturers, which could benefit from native ABC.com subscription services. Like Google TV, it’s much too early to speculate on whether ABC would spend significant resources to build native broadband services on multiple connected devices. However, Netflix has proven that you can build a pretty good business on streaming to multiple consumer electronics devices. ABC could really push the envelope here, but there’s also a significant chance that the broadcaster appeases affiliates and cable distributors by not pushing too hard on this front.